E-VAT a Competitive Advantage for Early Adopters

Starting from the beginning of this year, companies in Hungary can submit their VAT returns in one of three ways: 1) in the usual way, using the ÁNYK (General Form Completion Tool); 2) by approving the recommendation prepared by the tax authority on the online interface; and 3) using a machine-to-machine connection, by linking the company management system with the National Tax and Customs Administration (NAV) system.

The tax authority has gradually implemented the eVAT system function. At the start of the year, only the data queries related to VAT returns were available; returns could be submitted at the beginning of February. The next major step in development will take place when the self-revision function goes live, which is expected this summer.

Tax Return of the Future

In addition to eVAT helping to increase the speed and accuracy of the VAT return process for companies, the development is also significant because, in the coming years, it is expected to be extended to returns for all other company tax forms, including corporate tax and local business tax. The use of the eVAT system is not yet compulsory: the process started in January has most likely kicked off a two-to-three year transition period. After the outdated ÁNYK framework is phased out,eVAT will remain the only option.

Advantages for Taxpayers

The VAT return form recommended by NAV is the right solution for the majority of micro and small enterprises, as it removes administrative burdens. The M2M link is expected to be used by medium-sized and larger enterprises.

For companies where compiling and submitting the VAT return is complex or time-consuming, this return format may offer advantages even in the short term. In their case, the transition may lead to time and energy savings, providing an advantage over competitors.

It is also worth pointing out that the M2M link and the analyses provided by the tax authority can contribute to cleaning taxpayer data, thus significantly reducing risks and any penalties imposed during subsequent audits. This is especially interesting because the recently published audit plan shows that NAV intends to focus on auditing data reporting.

This means the tax authority has a vested interest in increasing users in the new system, which is why the legislature introduced several incentive amendments to the act on the taxation rules last fall. Under one such, taxpayers who choose the M2M return method do not have to pay a self-revision fee when remedying errors as part of self-revision within 15 days of submission. Under the other option, made available to reliable taxpayers, the tax authority will not launch tax audits within 15 days of the tax return submission by users who submit returns in the M2M eVAT system, allowing them to correct any possible errors.

How and When?

In most cases, an interface is required to apply the M2M return method, in other words, to link the accounting or company management systems used by the companies to the NAV system, which converts the data kept by the taxpayer into the structure expected by the tax authority. A software solution that offers an effective solution together with tax consultancy support is already available.

In addition to the arguments and advantages listed above, activating the eVAT system’s self-revision function this summer also incentivizes the change. Companies scheduling implementation to coincide with this introduction should start preparations now.

This article was first published in the Budapest Business Journal print issue of April 19, 2024.